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Delta Lloyd IPO to net Aviva 1.1bn

Life-insurer Aviva looks set to pocket &euro;1.2bn (&pound;1.1bn) when it floats Dutch unit Delta Lloyd in western Europe&rsquo;s largest initial public offering (IPO) this year.<br /><br />&ldquo;This step will free up capital for us to use elsewhere and give us the option of exploring further growth opportunities,&rdquo; said Aviva chief executive Andrew Moss.<br /><br />Delta Lloyd shares are set to start trading on Euronext&rsquo;s Amsterdam exchange on 3 November at between &euro;15.5 and &euro;19 each, valuing the business at &euro;2.6bn to &euro;3.1bn, Aviva said yesterday. <br /><br />About 42 per cent of Delta&rsquo;s shares will be sold, leaving Aviva as its biggest investor with 57 per cent, with Dutch charitable trust Fonds NutsOhra holding the balance.<br /><br />At the upper end of the price range, the shares are at a 24 per cent discount to Delta Lloyd&rsquo;s own estimate of its market-consistent embedded value (MCEV), a measure of an insurance company&rsquo;s worth.<br /><br />Delta Lloyd calculated its MCEV at &euro;4.1bn at the end of June. Under Aviva&rsquo;s more conservative accounting methods, Delta Lloyd had an MCEV of &euro;2.7bn at the half-year, pricing the IPO at a slight premium.<br /><br />&ldquo;From Aviva&rsquo;s point of view, it is probably less than they would like to have received for it, at less than embedded value, but at the same time it is a loss-making business,&rdquo; said MF Global analyst Peter Eliot<br /><br />The Delta IPO looks set to rank as the second-biggest in Europe this year after that of Polish utility PGE, which is expected to raise $2.1bn when it goes public on 6 November.